[SMM survey] Steel mills' 100-yuan profits coupled with low inventory levels may extend the downward trend in the impact from maintenance on building materials.

According to the SMM survey, the impact from maintenance of building materials production lines decreased slightly this week (6.21-6.27). Several steel mills resumed production on their building materials rolling lines that were under maintenance last week or this week, resulting in an impact from maintenance of 1.2689 million mt of building materials production this week, down 8,800 mt WoW.

Source: SMM

Last week, rebar prices consolidated, with the average spot price rising slightly. The average price center of iron ore, a raw material, shifted downward, and the fourth round of coke price cuts were gradually implemented. This slightly expanded the profit margins for building materials production, with most steel mills maintaining profit levels above 100 yuan per mt. As a result, their willingness to voluntarily cut production was weak, and the impact from maintenance of building materials production lines decreased slightly this week.

By region, according to the SMM survey, the impact from maintenance of building materials production lines decreased in the north-east, north-west, central, and south regions of China. In the north-east region, one steel mill's blast furnace maintenance affected building materials output, and it plans to resume blast furnace production this week, potentially increasing the volume of pig iron allocated to building materials. In other regions, some steel mills resumed production on their building materials rolling lines that were under maintenance last week or this week. In contrast, the impact from maintenance of building materials production lines increased in the north, east, and south-west regions of China. In the north region, some steel mills' building materials rolling lines underwent maintenance in late June, while in the south-west region, a steel mill plans to add a new rolling line for maintenance this week.

Looking ahead, the phased rainfall in south China is affecting the release of demand, significantly impacting the construction progress of some project sites. In the traditional off-season for demand, terminal and downstream purchases are mainly driven by immediate needs. Considering that current in-plant and social inventories are at low levels, resulting in relatively small inventory pressure, and that most blast furnace steel mills still have profit margins in building materials production, the production enthusiasm of steel mills is unlikely to decrease in the short term. According to the SMM survey, steel mills in the north and south regions of China resumed production on their rolling lines this week, while steel mills in the north region will begin to resume production on their rolling lines next week. It is expected that the impact from maintenance of building materials production lines may decrease next week.

Source: SMM